Back-to-school outlook: Record on the surface; K-shaped underneath

Back-to-school spending is on track to hit an all-time high in 2026, but middle market retailers should look past the headline number. Beneath the record total is a consumer base splitting further along income lines and absorbing a fresh round of cost shocks.

Growth is coming from price, not confidence

The National Retail Federation (NRF) projects 2026 back-to-school spending will reach $146.8 billion, split between roughly $43.3 billion for K-12 and $103.5 billion for college, making it the second-largest U.S. consumer spending event behind the winter holidays.

The headline total is driven by broader participation and higher prices, not by a consumer who feels flush. Back-to-school is one of the last purchases families cut, staying resilient even amid headwinds.

Despite large retailers advertising lower prices than last year on many SKUs, according to NRF, 78% of shoppers expect higher prices this year, and their response is to do more comparison shopping, wait for the next deal event, and buy fewer items per trip.

The result is higher reported sales even as underlying demand and confidence soften, a signal that retailers should not mistake for real pricing power.

Strong back-to-school sales have historically preceded a solid holiday season, and last year’s “cautious, value-driven” consumer approach correctly foreshadowed a season that still delivered. Sales in 2025 grew 4.1% and topped $1 trillion for the first time, even as shoppers traded down, according to NRF.

The lesson from last year holds: Plan for strong sales, but not a confident consumer. Retailers are sizing inventory and staffing for volume, while pricing and marketing for a shopper who is anything but confident.

Affordability and the K-shaped disconnect

Consumers’ capacity to spend rests on savings, wage growth and credit. All three legs of this stool are under strain.

First, the personal savings rate has fallen to roughly 2.6% to 3%, well below the 8.4% long-run average, and the bottom 80% of households by income have seen flat to negative growth in liquid assets over the past three years, according to NRF.

Second, wage growth is now matching inflation, leaving real wage growth near zero, with little improvement likely anytime soon.

Third, credit card delinquencies remain near record highs, though the transition rate into serious delinquency has begun to ease, according to TransUnion.

Any of these alone would make a household more careful; together, however, they explain why shoppers are even more cautious, stretching this record season across more weeks and deal events than ever before.

Record spending and a squeezed consumer are different views of the same K-shaped story. NRF’s analysis of credit and debit card data found the bottom seven income deciles saw negative year-over-year discretionary spending growth, while the top 20% of spenders drove over 60% of that growth, masking real weakness underneath a healthy-looking top line.

Where and how consumers are shopping is shifting

Back-to-school shoppers are starting earlier than ever, with 32% beginning by early June, up from 26% in 2025—but starting is not the same as finishing. Eighty-three percent were still less than halfway done as of mid-July, deliberately spreading purchases out, according to NRF.

Online shopping declined for both K-12 and college families, as stores, discount retailers and local businesses picked up share from consumers actively shopping around for value.

Tech spending is being redirected, not eliminated, as more schools supply devices directly, shifting K-12 families toward shared home computers, while college students chasing artificial intelligence-capable laptops push spending higher in that segment.

Mass-merchant price war is squeezing specialty and mid-tier retail

The clearest sign retailers are taking this consumer seriously is the price war among the biggest players. Several large retailers are advertising their lowest back-to-school prices since 2019. This is less a promotion than a traffic strategy for a flat-to-declining spending environment, and one that puts real pressure on everyone else.

Mass merchants can absorb thin or negative margins on notebooks and backpacks because they make it back on adjacent categories, private label and sheer volume. Specialty and mid-tier retailers do not have that luxury, and that is exactly where the squeeze is showing up first.

This price war is landing as input costs rise across multiple fronts.

• The effective U.S. tariff rate has eased from roughly 18% in 2025 to an estimated 11.1% but remains historically elevated, according to the Yale Budget Lab. The temporary import surcharge under section 122 of the Trade Act of 1974 has expired.  But new section 301 tariffs, along with other scheduled increases, are expected to push the average U.S. tariff rate to 11.8% by the end of the year.
• A memory chip shortage, driven by AI data center demand, not student demand, has pushed DRAM and NAND prices up 100% to 400% year over year, lifting a typical laptop’s price roughly 28%, according to Bloomberg.
• The simultaneous closure of the Strait of Hormuz and the Bab el-Mandeb strait has increased freight, packaging and energy costs across the board. Middle market retailers are feeling the squeeze most acutely since they have less pricing power than the mass merchants setting the pace.

Retailers competing purely on price without the scale to match are compressing margins twice: once from rising costs and again from the promotional environment mass merchants are setting.

The businesses managing this well are not trying to out-discount a 35-cent notebook. They compete on assortment depth, private-label quality, and service, using targeted, data-driven promotions instead of blanket discounts that erode margin fastest when costs are already climbing.